Bob McMullan (Fraser, Australian Labor Party, Parliamentary Secretary for International Development Assistance) Share this | Hansard source

Of course, I support this package of bills—in particular the Social Security and Other Legislation Amendment (Economic Security Strategy) Bill 2008 because of what it does for the pensioners, carers, veterans and people in need in my constituency—like all my colleagues on this side of the House. I broadly support the package because of its macroeconomic significance in the face of the global financial crisis, but today, under the heading of the appropriation bills, I mainly want to speak more broadly about the global financial crisis and some of its implications internationally and for the poorest of the poor.

Australians are already feeling the pinch of this global financial crisis. It is a problem here in Australia, particularly for many families close to the poverty borderline. Yet we are better placed than almost any other country to cope with this situation. Many Australians are having to tighten their belts, but for the poorest people in the developing countries in our region it is not a question of whether they eat in or eat out; it is a question of whether they eat at all. As many colleagues would know, this follows on from a period in which people in developing countries have been under pressure as a result of significant increases in fuel and food prices. We will not know what the final impact of the financial crisis will be on people in the poorest developing countries for some time, because the linkages are not as direct as they are in North America and Europe, but it is clear that there will be two impacts—maybe more. The first is the capacity for foreign investment to flow into these developing countries, which is the key driver of economic growth. Nobody can yet measure what the impact will be, but we know that foreign direct investment is likely to be constrained. Secondly, and most obviously, as the economic pressure mounts in North America and Western Europe the capacity of those countries to purchase the goods produced by the developing countries will fall. So we are in a situation where this global financial crisis puts people in the poorest countries and their countries under great pressure.

I am going to do something that I think is unique for me. I have been in this parliament a long time, and in the last eight years I have not found a cause to agree with President Bush on, but on this occasion I do. Last month he made an excellent speech about the need for those of us involved in responding to the global financial crisis to ensure that we do not turn inwards and lose our focus on the poorest people. He said:

… we meet … in the middle of a serious global financial crisis. Over the past few weeks, we have seen how the world’s economies are more interconnected than ever before.

…            …            …

During times of economic crisis, some may be tempted to turn inward—focusing on our problems here at home, while ignoring our interests around the world. This would be a serious mistake.

Secretary of State Rice, more directly, said:

Reneging on our commitments to the world’s poor cannot be an austerity measure.

I think President Bush and Secretary Rice are absolutely correct, and they reflect statements made by Prime Minister Brown and by Australia’s Prime Minister as well. Now is, in fact, the most critical time to maintain our assistance to offset the profound negative impacts of the three concurrent crises: the global financial crisis, the spike in food prices and the spike in fuel prices—although that is abating somewhat, but it still had a devastating effect. If we are seriously committed to the Millennium Development Goals—which we committed to not just in good times but for all time—we need to focus now, in difficult times, more fundamentally.

This government have a commitment to increase our aid expenditure to 0.5 per cent of GNI. The Prime Minister and the Minister for Foreign Affairs have reiterated our commitment to that in the face of this crisis, and I welcome that. There are two direct impacts that the global financial crisis will have on our 0.5 per cent commitment. Firstly, the dollar value of this percentage might not be as great as we originally envisaged because the value of gross national income may not rise as quickly as we anticipated in the normal budget forecasting parameters. Secondly, the decline in the value of the Australian dollar will have an effect on the impact of our commitment, although not as much as might be expected, because of the character of the expenditure. However, from time to time the decline in the value of the Australian dollar might impact on the dollar value of some of the initiatives we have taken in developing countries.

I emphasise in this context that the outlook for developing countries in our region continues to worsen. The number of people that could be pushed into poverty from the combined impact of the financial, food and fuel crises could be as many as 200 million globally. We talk a lot about measures to assist the poorest in developing countries. At the end of the day the fundamental reality is that, while economic growth is not sufficient in itself, there is no path out of poverty without economic growth. If economic growth slows, as appears inevitable, that will reduce the capacity of countries in our region to lift their poorest citizens out of poverty.

Recent new estimates suggest that in 2005 there were 1.4 billion people living in poverty globally. There is a link, of course, between income growth and poverty. The most recent estimates that I have seen from reputable agencies suggest that a one per cent reduction in global growth could push as many as 24 million people into poverty per year. Based on this simple estimate of global slowdown, it is currently envisaged that the global growth rate will drop from approximately five per cent in 2006 to maybe 2.2 per cent in 2009. Some are even more pessimistic than that, but let me use that as the basis of calculation. That could push an extra 75 million people into poverty. With downside risks to global growth in future, that number of 75 million more people in poverty might even grow. As President Zoellick of the World Bank has said:

The financial crisis will only make it more difficult for developing countries to protect their most vulnerable people from the impact of rising food and fuel costs.

It is always tempting when faced with a global financial crisis and its domestic implications to turn inwards and focus on our own domestic problems, and of course that is a fundamental responsibility of government. History of past downturns says that, when the countries of the world turn inwards in response to crisis, they make the crisis worse. The fundamental factor that turned a serious problem in 1929 into the Great Depression was people turning inwards to protectionism and cutting back expenditure when they needed to be increasing it.

We are faced again with a historic turning point where major decisions need to be made globally and by each individual nation about their approach. We need domestic stimulus packages such as the one reflected in these bills and in the other bills introduced today. We need to focus on the problems of the poorest people and those in most difficulty in our country, as is reflected in the social security measures in this package and those that are being foreshadowed for the budget. We also need to ensure that, as we move to respond to the crisis that we confront, we do not turn our eyes away from the poorest of the global community, those most dependent upon our assistance, who have become even more vulnerable as a consequence of the global financial crisis and for whom this will be literally a life and death issue, as against an issue of serious disadvantage and difficulty for people in our country and in developed countries around the world.

We must never take our eye off those who we directly represent: the pensioners, the veterans and the carers in my constituency and all the other constituencies around the country. I am delighted to support these bills for their domestic impact, particularly for those most disadvantaged in my electorate of Fraser. I also endorse the underlying approach of these bills and others introduced today as part of a broader strategy of response to the global financial crisis which not only responds to Australia’s legitimate domestic concerns but also allows us to continue to play a positive role in response to the global concerns for the most vulnerable in our global community. Therefore, it is my great pleasure to support these bills and commend them to the House.

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